Bush's "Short Term Economy" Problem

[mddem2004]

Although it appears National Security and Foreign Policy will play a larger role this election than usual, the economy will still likely be the deciding factor in how the undecided and 'persuadable' voters break this election.

Because many elections have turned on what voters felt about the "Short Term" economy (ie - how they felt about the economy right before an election), I thought it was time to look at how Bush may fair on that issue with 63 days left to go.

To preface this however, two things should be kept in mind:
1) Throughout much of the spring & early summer Bush's central economic message that voters can identify has been "my tax cuts have worked" to "turn the corner on the economy".

2) Dispite what APPEARS to be an improving economy, voters still give Kerry a slight advantage on questions of handling the economy, job creation, and making America more prosperous.

Going into the final strech of the campaign there appear to be several significant economic factors that will disprove Bush's assertion that we have "turned the corner" and in all likelyhood will turn the election against him.

I. JOBS-JOBS-JOBS
The most politically sensitive issue for Bush's re-election chances. An issue that in the spring/early summer the Bush campaign thought they could put to rest and silence his opposition. Lets look at the numbers:



As you can see, despite very strong numbers in the spring, there has been a dramatic downward trend since May.

May 235,000
June 112,000
July 32,000
Aug

The Bush camp has argued for months now that his tax cuts would produce jobs. They did to the tune of 1.5 million in 1 year. The problem, as seen by this graph and now whispered on Wall St., is that the growth was not sustainable. Coupled with that and largely acknowledged by the electorate, is that the jobs that were produced were lower paying than those lost, with less benfits, and many were "temp/seasonal" jobs. Fully 1/3 of all jobs created in May were 'temp/seasonal".

This Friday, the day after the RNC ends in NYC, the August Jobs Report will be out. This will be in my view the most important Jobs report of Bush's entire term. The markets are expecting 150,000 jobs to have been created. Another month like July's performance and the electorate will not buy what Bush is selling.

II. GDP
The 3rd quarter of 2003 saw an astonishing 8% growth in GDP. The 4th quarter of 2003 and 1st quarter of 2004 saw a more realistic 4% growth in GDP.

The numbers now out for the 2nd quarter of this year have been revised downward to 2.8%. Still not bad growth, if looked at alone. Seen in conjunction with other economic indicators, maybe not as good at first glance.....

III. Consumer Spending-Confidence/Real Wages
Consumer spending fell in the monh of June alone .7%, the steepest plunge since September 2001.

Consumer confidence, although still low by historic standards, was on the rise through much of the spring and summer. According to the ABC News Weekly Consumer Confidence Index, June went from -20 to -11, the month of July averaged -7, and in the month of August it went from -6 to -9 to -10 to -9. Clearly the improving trend in how consumers feel about the economy has stalled, and stalled at what are historically low numbers.

Workers wages, after a few months of modest gains this year have also stalled, even declined, as well. There was no change in Real Wages in the month of June, the worst performance since wages actually fell .01% in December.

IV TRANSPORTATION COSTS
Currently the price for a barrel of oil has stabilized at $43 and some of the concerns for a $50 a barrel have not come to pass. Industry analysts predict that the price of gas in the US will actually fall slightly soon from the current $1.88 because of the end of the summer driving season.

However, this price is .137 cents more a gallon than a year ago and represents a 7% increase over last year. Since much of that increase came in the spring, and higher gas prices appear to be here to stay, it is only now that increases in other commodities (milk, bread, clothing, etc) are taking effect and also appear here to stay. Needless to say in looking at the recent behavior of the Oil Markets, volitility and uncertainty rule.

V THE STOCK MARKET
Although the markets have improved back to the "pre-dot com bust" levels, the stock market appears to be stalled as well. In January 2004 the Dow began the year at 10357, slightly above where the market is at today and with the factors listed above will likely not exceed that level come election day.

VI INTEREST RATES/FEDERAL DEFICIT
The Fed has recently raised interest rates a modest 1/4 point. The Fed has indicated that it is likely to do so for the next few board meetings. In light of much of the above, particularly a weak jobs market, it may not. If it does not, it is clearly a sign they are worried the Bush "recovery" is not sustainable.

The final piece of economic news Bush must weather will be the CBO estimate of the fiscal 2004 deficit. Its well known that most voters do not vote on the deficit issue alone. Yet, with record deficits piling up to the tune of approximately $1.1 trillion (a 20% increase over 2001) by this administration by this October - $435 estimated for FY 2004 alone - it is the elephant in the room that no longer can simply be ignored.

IN SUMMARY - An issue, that only a few months ago looked like another "slam dunk" for the president, appears to be the most serious threat to his re-election. Voters in these remaining 63 days will be faced with the choice of re-electing a president that is offering:

a) A return to a very weak jobs recovery.
b) A decline in the GDP to lacklauster performance.
c) A decrease in consumer spending and overall consumer confidence.
d) Flat or declining wages.
e) Increases that are here to stay in fuel and thus affecting basic commodities.
f) A flat stock market.
g) A Republican Administration that has lost all sence of control over government spending.

In many of the Battleground States that have felt this the most, Bush most certainly will "feel their pain" come election day.
 

[MODU]

Consumer spending up 0.8% in July.

http://biz.yahoo.com/ap/040830/economy_7.html

[muon2]

History indicates that the electorate acts like it looks more at the first two quarters rather than the 3rd quarter of the election year to sense trends. This was especially true in 1992, where the economy was clearly on a solid recovery in the third quarter, but it was too late to influence voter perception in November.

Traditionally the GDP is used a the best measure of economic growth. It does have its problems, but it neither leads like stocks or lags like jobs. I don't think the stock market will resonate as an economic measure this year, but jobs may affect the normally good GDP numbers that have occurred. The interesting battle may be between job creation and unemployment figures. They don't measure the same thing, and we've had threads debating the merits of these two measures.

On the otherhand consumer spending was reported to be up 0.8% for July, ahead of analysts estimates. Wages also  grew, but at a slower pace than expected.

[The Vorlon]

I think this Friday's job number is very key to this race.

If it is a "middle" number say 150-200K I think it is "spinable" both ways and has little effect.

If it is "bad" say under 100K the the media will beat it to death and likely take a real good chunk out of whatever bounce bush gets from his convention.

If it is good, say 250K or better, I think it gives Bush a message to really pound away at while his convention glow is still fresh.

There we a bunch of kinks in the July data, so I'll go waaaaaaay out on a limb here and say that August will be 238,000 - just a tad below "good"..

Remember, I have had uncanny Zogby like accuracy on these job numbers and my predictions have never missed by more than 194,000 in any one month...

[MODU]

Margin of error being 200,000, right?  

Yes, looking at all the factory output numbers from July, and more than 30% of the companies polled saying they were hiring, we should be over 150,000.  Of course, we heard the same data last time, and got burned.

Maybe they'll have a revision for last month?

[ATFFL]

Margin of error being 200,000, right?  

Yes, looking at all the factory output numbers from July, and more than 30% of the companies polled saying they were hiring, we should be over 150,000.  Of course, we heard the same data last time, and got burned.

Maybe they'll have a revision for last month?

They always have a revision.  I can't remember the last time there was no revision in the previous months.

I heard a rumor that I think everyone will love.  The Bush  administration, knowing that early July would not be the time good economic news would get through, intentionally lowballed the job creation numbers for July to pump up the August report so the good news would come out after his convention when he had the media all to himself.

I love a good conspiracy

[MODU]

I stomach conspiracy theories as well as I stomach pictures of my ex-g/f.  

[The Vorlon]

Margin of error being 200,000, right?  

Uncanny Zogby like accuracy.

+/- 194,000

[MODU]

hahaha . . . I'll call John and warn him that you are stealing his methodology.  

On a truly non-political point though:  I surely hope these numbers are high.  Consumer confidence is up, and the economy is gaining strength.  What we need now is another few months of great job numbers to completely lift the remaining fog that remains from the recession once and for all, and remove one more worry off the shoulders of workers (and currently unemployed) everywhere.

[Bogart]

Consider also, it seems most people vote economically based upon their own current situation. Statistics don't necessarily hold a lot of water for them unless the statistics back up what they already are feeling about the economy.

[zachman]

There are two economic statistics that matter: job reports and the price of gasoline.

We have already discussed job numbers, so I'm going to talk about gas prices in this post.

Although the crude oil price has decreased over the last few months, the ratio of the crude oil prices/ the price of a gallon of gasoline is still far above its traditional levels. The big question is will this cause gas prices to increase, or will the traditional ratio be sustained over a longer period of time?

[MODU]

It shouldn't.  Our gas out here peaked back in mid-July, and has been either holding steady or dropping ever since.  Now that we are in the lower demand period, we should continue to see oil prices fall until we get closer towards winter.  Most fuel oil producers which supply the winter heating oil are already in their production period, so cheaper oil now will allow for cheaper heating oil later (still higher than last years).  With the Farmers Almanac calling for a wetter winter, the thing we need to keep an eye out for is air temps.  If the temps are low, and we get a lot of snow, then the economy will take another financial hit.  If it stays above freezing, we should be ok.

[mddem2004]

I was mistaken.

June's Job numbers were revised downward from 112,000 to only 78,000.

[Bogart]

Do you really think people decide who to vote for based upon the price per gallon?

[mddem2004]

As I said......Here It Comes......

Consumer Confidence Plumets in August

http://www.forbes.com/home/feeds/ap/2004/08/31/ap1524806.html

Not a good precurser to what Fridays Jobs Report will be.......

[Friar]

I don't think the job numbers will look good. I wish they would be 500,000 or even a million new jobs but I don't think it will happen.

Remember the July job report was a 5 week reporting period and even that didn't help. The  August report will be a 4 week reporting period.

My guess is job numbers below or arround 100,000.

[MODU]

Possibly, but not necessarily.  Consumer confidence is based off of historical information.  We had two months of less-than-expected job growth, however we have seen a greater increase in factory output plus 30% of the corporations saying they were hiring.  Just as consumer spending reported yesterday that it was up 0.8%, Friday can report 150,000+ jobs.

Now, to throw in another variable, how many of these jobs would have been in Florida where the Hurricane went through?  And, when the next umemployment figures come out, the same question applies.

[khirkhib]

So I thought it might be interesting to see the increase in Poverty against the electoral college.  The map is from Dale's Electoral College Prediction page.  I thought you guys could agree to that map.  The numbers are from the Census Bureau   - written up in the associated press.
Since 2000 Poverty has increased by .4% nationally up to 12.1%.  It varies greatly in each state as high as 18.5% in West Virginia and as low as 6.0% in New Hampshire.  10 states had an improvement or no change in Poverty so I that people in those states are the most likely to percieve in improvement in the economy. (I highlighted those numbers in light yellow). 25 states and DC had an increase in poverty higher than that of the national average.  I highlighted in light blue the states that had an increase of .2 more than the national average.  I thought that relative to the states rate this increase would be easily percieved.  The only analysis of this I'll do is that it does seem that Appaliacia recieved the brunt of the increase in poverty.  What do you think?



http://www.dalythoughts.com/ecb.htm
http://story.news.yahoo.com/news?tmpl=story&cid=513&ncid=691&e=3&u=/ap/20040827/ap_on_go_ot/poverty_states

[mddem2004]

So I thought it might be interesting to see the increase in Poverty against the electoral college.  The map is from Dale's Electoral College Prediction page.  I thought you guys could agree to that map.  The numbers are from the Census Bureau   - written up in the associated press.
Since 2000 Poverty has increased by .4% nationally up to 12.1%.  It varies greatly in each state as high as 18.5% in West Virginia and as low as 6.0% in New Hampshire.  10 states had an improvement or no change in Poverty so I that people in those states are the most likely to percieve in improvement in the economy. (I highlighted those numbers in light yellow). 25 states and DC had an increase in poverty higher than that of the national average.  I highlighted in light blue the states that had an increase of .2 more than the national average.  I thought that relative to the states rate this increase would be easily percieved.  The only analysis of this I'll do is that it does seem that Appaliacia recieved the brunt of the increase in poverty.  What do you think?



http://www.dalythoughts.com/ecb.htm
http://story.news.yahoo.com/news?tmpl=story&cid=513&ncid=691&e=3&u=/ap/20040827/ap_on_go_ot/poverty_states

Thats interesting khirkhib,
I agree Appaliacia got hit hard.
WVA - .9% increase, PA - .7%, NC - 1.1% - Highest increase in nation, KY - .6%, VA - .6%, TN did well - only .1% increase.

Battleground States averaged out were a .463% increase, slightly higher than National Average of .4%.

OH - .4%
PA - .7%
WVA - .9%
WI - .2%
WA - .6%
TN - .1%
OR - .5%
NM - .2%
NH - .4%
MO - .5%
MN - .6%
MI - .5%
IA - .2%
ME - .5%
FL - .6%
CO - NO CHANGE
Ark - .5%

[mddem2004]

I'm gonna go out on a limb here and say on Fridays jobs report:
200k +  Bush will win election hands down
150-200k   Positive Bush spin
125k  150k  positive Kerry spin
<125k - Kerry will win (especially if less than 100K)

Bush does have the higher bar here because, make no mistake about it, the markets are Expecting 150K jobs to be on that report. Market analysts have acknowledged that 125k is the Minimum to sustain any respectable growth after the last two weak months. Another dismal jobs report and watch the markets go nuts........in a negative way.

To paraphrase one market analyst......"If jobs come in low,
we won't be talking about the (Republican) convention Monday morning"......

[DFLofMN]

Don't forget that even if there is low job growth, we are a nation that has a growing population and a growing labor force, meaning more people are seeking jobs.  Low job growth might mean it is not even keeping up with more people in the job market

[mddem2004]

Just for the record:
The Bush economy has produced 1.458 million jobs since Aug.1 2003.
Thats an average monthly rate of job creation of 121,500 jobs OR 28,500 jobs A MONTH less than what is required to absorb new entrants into the work force.

[MODU]

You are assuming that they are all going into the workforce.

[mddem2004]

You are assuming that they are all going into the workforce.

Thats not my assumption, thats straight from the BLS.

EMPLOYMENT SITUATION
What is it?
Represents the month-to-month change in jobs on payrolls of the nation's business, government and non-profit establishments. Generally considered a more accurate indicator of labor market health than the unemployment rate. Analysts estimate the economy should add about 150,000 jobs monthly to keep up with the nation's growing work force. Based on a sample of 300,000 establishments employing nearly a third of the nation's workers, the figure is adjusted for seasonal variations and frequently revised.
Source: Bureau of Labor Statistics.

[mddem2004]

George and the Jobs Report

http://www.msnbc.msn.com/id/5886939/